Sony has concrete goals

Co-founder Akio Morita and his words are displayed on a hallway wall inside Sony Electronics' new $150 million Rancho Bernardo headquarters, which will be dedicated today in a ceremony attended by Chairman and Chief Executive Howard Stringer. (Sean M. Haffey / Union-Tribune)

Co-founder Akio Morita and his words are displayed on a hallway wall inside Sony Electronics' new $150 million Rancho Bernardo headquarters, which will be dedicated today in a ceremony attended by Chairman and Chief Executive Howard Stringer. (Sean M. Haffey / Union-Tribune)

They're a testament to Sony's rich history of technology innovation that includes the Walkman, Trinitron televisions and PlayStation game consoles.

But these days, Sony has lost ground to competitors on products where it used to be the undisputed leader.

Apple's iPod dominates the portable music player market. Sony is a distant third place in TV market share in North America. And PlayStation 3 sales lagged because its prices were high compared with rivals such as Nintendo's Wii and Microsoft's Xbox 360 — though a recent price cut has sparked a rebound.

The task of turning Sony around has fallen to Chairman and Chief Executive Howard Stringer, who will be in San Diego tomorrow for the dedication of the headquarters for Sony Electronics.

His strategy relies on streamlining manufacturing and putting a greater emphasis on software to go along with Sony's know-how in hardware.

But analysts say the strategy also involves getting the company's myriad, often monolithic business units to work together so the company can react faster to an ever-changing marketplace.

The $150 million Sony building in Rancho Bernardo is a symbol of that goal.

“The most important thing to me is that we now have a collaborative building,” said Stan Glasgow, president and chief operating officer of Sony Electronics in San Diego. “There are teams that have never been so close together that needed to be close together.”

About five years ago, Sony Electronics moved from Park Ridge, N.J., to San Diego. The division oversees sales and marketing for all electronics gadgets for North America, including TVs, audio equipment, cameras and computers.

There's also a technology center in San Diego where engineers work on software and hardware product development for North America, as well as a Vaio computer assembly plant. In all, the campus employs about 2,000 workers.

This has been a tough year for Sony. The company overall posted a $271 million operating loss in its April-to-June quarter, compared with a $772 million profit the prior year. For its fiscal year ending in March, the company is forecasting a $1.3 billion loss.

The global recession has hurt all electronics makers. Plunging prices for TVs in particular also have marred results. But some analysts say Sony has been hit especially hard.

“Sony is a company that has been incredibly frustrating to watch over the past couple of years,” said Rob Enderle, a technology analyst based in the Bay Area. “This is a tough market for anybody, but for a company that's its own worst enemy, it's particularly damaging.”

Enderle cites PlayStation 3's troubles as an example. Sony included its Blu-ray high-definition technology in the PlayStation 3. The company fought a pitch battle with a competing technology, called HD-DVD, to make sure Blu-ray became the standard for high-definition discs and players.

But Enderle contends that Blu-ray technology was expensive. Including it in the PlayStation 3 pushed up the price of the game console well above its competitors.

The result: Sony lost market share and suffered losses in its game console business, Enderle said.

“They probably would have been better if they had lost (the Blu-ray versus HD-DVD standard war) because it cost them so much.”

Sony recently re-launched PlayStation 3, cutting its price. Sales have rebounded in the past couple months, according to the company.

The TV market has been another tough one for Sony this year. For decades, its Trinitron picture tube technology produced arguably the best picture quality. So Sony, which made picture tubes in San Diego, could charge more for its sets.

“I remember when I bought my first TV,” said Riddhi Patel, principal TV analyst with technology research firm iSuppli. “Sony Trinitron was what you wanted but couldn't afford. I regretted not buying a Sony.”

The switch to flat-panel Liquid Crystal Display TVs occurred faster than Sony expected, however. It now partners with Korea-based Samsung for the glass in its flat panel sets. It stopped making picture tubes in San Diego years ago.

While Sony includes its own picture technology in flat-panel sets, other manufacturers have caught up.

“I don't think you can say a Samsung TV has a better picture than Sony TV,” said Richard Doherty, co-founder of industry researcher Envisioneering Group. “But (the difference) has narrowed, and that's one of the problems.”

Today, Samsung has the TV market share lead in North America. Low-cost upstart Vizio of Irvine is second.

Sony fell to third place with an 11 percent market share for LCD sets in the second quarter, based on units shipped. Samsung had 20 percent and Vizio 18 percent, according to analysts.

Samsung surged ahead because it has been quick to introduce new technologies to the market, such as new backlighting for LCD TVs, analysts say.

“Sony has been a little bit of a slower moving company,” said Paul Gagnon, director of North American TV research at Display Search. “The Korean manufacturers tend to be very fast-moving, and they're really aggressive on price.”

Patel, the iSuppli analyst, said prices on average for the most popular size LCD TVs have dropped 19 percent in the past year.

“Sony has not been that reactive to the price changes happening in the market,” she said. “Price is ruling the market right now.”

Glasgow, the Sony Electronics president, said he is confident the company will get back on top in the TV market. “We have some great products,” he said. “We just have to market them and execute at retail.”

Glasgow is also confident in other product categories. While digital camera sales industrywide are down, Sony is gaining market share, he said. Its audio products division also is doing well, although Walkman, which were first introduced 30 years ago, lags iPod in market share by a wide margin.

“We like to win in every product category,” Glasgow said. “We're not winning in that particular product category right now, but the goal is to win.”

Glasgow is optimistic about e-book readers that Sony has introduced to compete with Amazon's Kindle. The worldwide sales effort for Sony's eReaders is based in San Diego.

“We are expecting a better holiday this year,” Glasgow said. “We didn't spend that much in the first half of the year because we thought we wanted to really reserve it for this holiday season. So we're going to have a much better marketing presence across the country.”